Potential Market Effects of Selected Policy Options in Emerging Economies to Address Future Commodity Price Surges
AbstractThis report examines the market outcomes of different policy options that could be adopted in the event of a future spike in the world price of wheat and rice. The three policies – additional border measures, consumer subsidies or public stocks – only partly mitigate the effect of a price spike on consumers in the implementing countries. However, taxpayer costs can be large, particularly for broad consumer subsidies or to build and carry grain stocks. Trade measures reduce domestic prices to producers, suppressing long-run supply response. There are also negative unintended consequences for international markets and market participants in other countries that trade on these markets. New consumer subsidies or trade measures introduced by some countries to offset rising international grain prices causes those prices to rise even more in other countries. Releasing public stocks eases tight markets and lowers prices in all markets, helping to reduce the price spike, but stock building and rebuilding phases mean higher market prices and less food consumption at other times. In conclusion, none of these policies is an unambiguous solution that sustains food consumption during times of high prices with minimal taxpayer and other costs.
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Bibliographic InfoPaper provided by OECD Publishing in its series OECD Food, Agriculture and Fisheries Papers with number 35.
Date of creation: 14 Oct 2010
Date of revision:
Commodity price spike; consumer subsidies; trade measures; public stocks; food security;
Find related papers by JEL classification:
- J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods
- Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General
- Q17 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agriculture in International Trade
- Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
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